Saturday, January 28, 2023

GBP/USD Technical Analysis: Selling Level Sufficient

The readings of the services sector in both the UK and the US will react to the behavior of the currency pair.

The pound exchange rate against the dollar gave back part of its previous gains in the last session of the previous week. This comes after official data indicated that US job growth continued in November at a faster pace than many had expected, in line with the possible outcome of the Federal Reserve’s interest rate policy. Profits from GBP/USD’s bullish bounce took it to the 1.2310 resistance level, the highest for the currency pair in five months, and closed the week stable around the 1.2290 level.

US economic data

Some 263,000 Americans gained work during the month of November, while the number of new US jobs created in October was revised up from 261,000 to 284,000, surprising an economic consensus that had expected a smaller increase, 200,000 in November. and 197,000 in October. This outcome is likely to have important implications for the outlook for interest rates in the US. As US Federal Reserve Chairman Jerome Powell said last week that “If the Fed is to be confident that inflation will eventually return to the 2.0% target, moderation in labor demand growth is needed.

In this sense, Hussein Mahdi, an analyst at HSBC Asset Management, confirms: “US employment, along with other measures of labor market activity, such as job offers and wage growth, is very much to the Fed’s liking”. “Given this, and amid broad US economic resilience and stable core inflation, we believe speculation about Fed tightening after the January/February meeting is not warranted,” Mahdi said after reviewing the data. Find today’s GBP/USD exchange rate here.

Powell said earlier this week that strong and sustained demand for workers combined with a contraction in the labor supply has pushed wage growth rates to levels that could move away from the federal inflation target of 2%. The contraction in job supply has been attributed to the coronavirus, a decrease in immigration during the pandemic and an unusually high number of people choosing to retire in recent years. The latter was attributed to the wealth generated by the stock market during the pandemic. For her part, CIBC Capital Markets economist Catherine Judge confirmed that: “The Fed is looking for calm in the labor market to get inflation back on target, and the employment data for November didn’t offer much on that front.” The report had some weaknesses, as the household survey showed a decrease in employment for the second month in a row, but when combined with a decline in the participation rate, the unemployment rate remained unchanged at 3.7%.

Overall, the supply-demand mismatch was visible again on Friday, when the US Bureau of Labor Statistics reported that wages rose 0.6% in November, up from a higher-revised 0.5%. compared to the 0.3% agreed upon by economists. Annual wage growth in November was 5.1%, up from 4.9% earlier, and was slightly higher than the basic personal consumption price index (Basic PCE) inflation rate reported for October last Thursday.

Announcement

This particular measure of inflation is the Federal Reserve’s preferred measure of price pressures in the US, while changes in wages and salaries to workers, particularly in the non-market service industry real estate, can have a significant impact on this particular measure of growth. , before, Minutes of the US Federal Reserve’s November policy meeting indicated that most FOMC members settled on sticking with the September FOMC forecast last month, This indicates that US interest rates may rise from 4% in November to 4.75% in the coming months. The fall in US inflation in October appears to reflect this trend, But Powell was already seeing last month that US data argued for higher rates and Friday’s US jobs number favored the Fed chair more than the November FOMC.

GBP/USD forecast today:

  • upward path of GBP/USD gaining momentum With the continued decline of the dollar and tentative confidence in plans to reactivate the British economy.
  • If we observe the behavior of technical indicators daily forex chart shown below, They move towards overbought levels.
  • Unless the pound receives further boost, the currency pair could be exposed to sell profits at any time.
  • The nearest resistance levels for the currency pair are 1.2365 and 1.2420 respectively.

On the other hand, and in the same period, bears need to break support level 1.2030 to end the current bullish expectations. The readings of the services sector in both the UK and the US will react to the behavior of the currency pair.

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Nation World News Desk
Nation World News Deskhttps://nationworldnews.com
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